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Courts in California Reject Duty to Label Products as Resulting from Child or Forced Labor

The Northern District of California is the latest court to rule that a consumer product company does not have an obligation to affirmatively disclose information on packaging about supply chain labor practices. Plaintiffs in Hodsdon v. Mars, Inc. claimed that Mars had an obligation to state on the label that chocolate products like M&Ms, Snickers, and Milky Way may contain cocoa beans picked by child or forced labor, and that the omission of that information from the packaging violated California’s False Advertising Law (“FAL”), Unfair Competition Law (“UCL”), and Consumers Legal Remedies Act (“CLRA”). Plaintiffs argued that consumers were willing to pay more for ethically sourced chocolate and would not have purchased or paid as much for the chocolates had the labels included information about the suppliers’ labor practices. The court held that Mars had no duty to disclose this supply chain information and granted Mars’ motion to dismiss without leave to amend because amendment would be futile. In doing so, the court questioned whether the safe harbor doctrine might also bar the claims, but did not resolve the issue.

First, the court held that the omission of the labor information from the label could not support a FAL claim because “when the crux of a plaintiff’s FAL claim is that the defendant did not make any statement at all about a subject, then a claim under the FAL may not advance.” Second, the claim under the CLRA and the “unlawful” prong of the UCL failed because, while manufacturers have a duty to disclose information about product defects and product safety risks, they have no affirmative duty to disclose information simply because it may persuade a consumer to make a different purchasing decision. Third, the claim under the “fraudulent” prong of the UCL was not viable because the plaintiffs did not charge that Mars made misleading statements on the label and could not show that a reasonable consumer would be misled by the failure to disclose information that the company had no obligation to provide in the first instance. Finally, the claim under the “unfair” prong of the UCL failed because it was not “substantially injurious, immoral, or unethical” to omit information that Mars had no duty to disclose, nor did plaintiffs reference any specific regulatory or legislative acts that would support the claim that non-disclosure violated public policy.

This result is consistent with two recent orders in Wirth v. Mars Inc., No. SA CV 15-1470-DOC, 2016 WL 471234 (C.D. Cal. Feb 5, 2016), and Barber v. Nestle USA, Inc., No. SACV 15-01364-CJC, 2015 WL 9309553 (C.D. Cal. Dec. 9, 2015), that each dismissed all claims with prejudice. Those courts considered allegations that the defendants violated the FAL, UCL, and CLRA by failing to state on the packaging that Iams cat food and Fancy Feast cat food, respectively, likely contained seafood that had been caught using forced labor. In Wirth, the court dismissed all claims on the basis that the defendants had no duty to make the disclosure and, separately, that the California Transparency in Supply Chains Act provides a safe harbor against the allegations. In Barber, the court held that the safe harbor doctrine barred the claims and concluded that the plaintiffs did not plead any misrepresentation claim that could escape the safe harbor doctrine.

Collectively, these recent decisions disclaim any duty to affirmatively state on the label that a product’s ingredients may be the result of child or forced labor and limit the reach of California’s consumer protection statutes on the issue of supply chain labor disclosures. Click here for a link to the California Attorney General’s Resource Guide to the California Transparency in Supply Chains Act, which sets out other supply-chain-related disclosure obligations that go beyond product packaging and affect some companies.

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